London Daily

Focus on the big picture.
Thursday, Sep 11, 2025

UK banks start cutting 'Truss premium' from mortgage rates, but slowly

UK banks start cutting 'Truss premium' from mortgage rates, but slowly

Having hiked mortgage rates after political turmoil drove up the cost of borrowing, British banks are now cutting home loan prices, albeit slowly, as markets calm since Liz Truss's government collapsed and Rishi Sunak took power.

Market chaos unleashed by Truss's vast unfunded tax-cutting plans in late September led lenders to withdraw around 1,700 mortgage products in the space of a week, before reintroducing them at rates 1-2 percentage points higher.

But as markets have stabilised and borrowing costs have fallen, the trickle of mortgage rate cuts has lagged behind.

Several key interest rate swaps - products that lenders use to lock in future rates before pricing fixed-rate mortgages - have fallen by between 1.3 and 1.4 percentage points from their Truss-administration peak, Refinitiv data shows.

By contrast, average rates on two-year and five-year fixed-rate mortgages have fallen just 0.16 percentage points, Moneyfacts data shows.

"Lenders are able to get away with not passing cheaper rates on to mortgage customers, aided by the failure of Britain's over-concentrated banking system to function like a competitive market," said Simon Youel, head of policy and advocacy at Positive Money, which campaigns for a fairer financial system.

A spokesperson for banking lobby group UK Finance said the mortgage market was competitive, adding that lenders used a range of criteria to determine pricing.

Housing experts say further price drops should follow based on the market shift since Truss and her team's departure.


Mortgage brokers say fixed-rate mortgage rates typically lag changes in swap rates, a trend which could be exacerbated this time as lenders focus on reintroducing products. The number of fixed-rate offerings is still down nearly a quarter from pre-Truss levels, according to Moneyfacts.

Lenders are under pressure to show they are treating customers fairly in the cost of living crisis, and have already faced criticism from consumer groups for not passing enough Bank of England rate rises to savers.

They also face the threat of a potential tax raid from Sunak's government as it looks to plug a gap in the country's finances.

Britain's housing market has boomed since the initial impact of the COVID-19 pandemic, but squeezed household budgets exacerbated by more costly home loans looks set to plunge it into a downturn.

The country's largest mortgage lender Lloyds (LLOY.L), owner of the Halifax brand, said on Thursday it expected a mortgage market slowdown next year, and for house prices to drop 8%.

After years of cheap borrowing, mortgage prices had been climbing this year as the Bank of England ratcheted up benchmark rates. But this accelerated after Truss's finance minister Kwasi Kwarteng laid out a disastrous "mini budget" on Sept. 23.

The average rate on a two-year fixed rate mortgage leapt as high as 6.65% by Oct. 20, Moneyfacts data shows, whereas prior to the budget it was 4.74%. Opposition politicians labeled the jump a "Truss premium" on mortgages.

The average two-year rate has since edged down 0.16 percentage points to 6.49% as of Thursday. Five-year mortgage rates have followed a similar pattern, Moneyfacts data shows.


FISCALLY MODERATE


However, market pricing on future benchmark rates has fallen significantly since peaking in late September, Refinitiv data shows, as markets have warmed to a more fiscally moderate finance minister Jeremy Hunt and prime minister Sunak.

Two-year interest rate swaps have fallen from a peak of 6.1% on Sept. 28 to 4.7% as of Thursday, according to Refinitiv data, greatly outpacing the dip in mortgage rates.

It's a similar picture for five-year rates. Money market five-year swap rates are down 1.3 percentage points from their post-budget peak to 4.4%, whereas the average five-year fixed mortgage is so far just 0.16 percentage points cheaper than the Truss peak, down from 6.51% to 6.35%.

"There have been a couple of signs of reductions, some are significant," said Mike Read, financial adviser at mortgage broker Prospect Tree Financial Services. "We probably need a few more weeks to see it filtering though."

Santander's (SAN.MC) British arm has been among the first lenders to lower mortgage rates this week, cutting some fixed rates by as much as 0.5 percentage points, according to Moneyfacts, while Yorkshire Building Society's Accord brand cut rates by up to 0.53 percentage points.

Barclays (BARC.L) finance chief Anna Cross told analysts after the bank's earnings that the mortgage market was competitive and pricing should follow market conditions.

Lenders have said increasing mortgage rates in recent weeks was the rational thing to do as volatile money markets priced much higher future interest rates last month, so higher prices were needed to avoid them writing home loans at a loss.

Lloyds said on Thursday its future pricing would partly be determined by moves in money markets.

"We'll have to see how these fare on a sustainable basis going forward," the bank's finance chief William Chalmers told reporters. "We will do our best to respond to customers in the most appropriate way."

Newsletter

Related Articles

0:00
0:00
Close
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
Pig Heads Left Outside Multiple Paris Mosques in Outrage-Inducing Acts
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
On the Anniversary of Queen Elizabeth’s Death: Prince Harry Returns to Britain
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Murdoch Family Finalises $3.3 Billion Succession Pact, Ensuring Eldest Son’s Leadership
Big Oil Slashes Jobs and Investments Amid Prolonged Low Crude Prices
Court Staff Cover Up Banksy Image of Judge Beating a Protester
Social Media Access Curtailed in Turkey After CHP Calls for Rallies Following Police Blockade of Istanbul Headquarters
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
Elon Musk Poised to Become First Trillionaire Under Ambitious Tesla Pay Plan
France, at an Impasse, Heads Toward Another Government Collapse
Burning the Minister’s House Helped Protesters to Win Justice: Prabowo Fires Finance Minister in Wake of Indonesia Protests
Brazil Braces for Fallout from Bolsonaro Trial by corrupted judge
The Country That Got Too Rich? Public Spending Dominates Norway Election
Nearly 40 Years Later: Nike Changes the Legendary Slogan Just Do It
Generations Born After 1939 Unlikely to Reach Age One Hundred, New Study Finds
End to a four-year manhunt in New Zealand: the father who abducted his children to the forests was killed, the three siblings were found
Germany Suspends Debt Rules, Funnels €500 Billion Toward Military and Proxy War Strategy
EU Prepares for War
BMW Eyes Growth in China with New All‑Electric Neue Klasse Lineup
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
US Justice Department Launches Criminal Mortgage-Fraud Probe into Federal Reserve Governor Lisa Cook
Escalating Drug Trafficking and Violence in Latin America: A Growing Crisis
US and Taiwanese Defence Officials Held Secret Talks in Alaska
Report: Secret SEAL Team 6 Mission in North Korea Ordered by Trump in 2019 Ended in Failure
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Florida Murder Case: The Adelson Family, the Killing of Dan Markel, and the Trial of Donna Adelson
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
×